Cooperative Crisis: What Is the Process for Returning Depositors’ Funds as Promised by the Government?
Photo credit, Kushalav KC
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The new government has included the repayment of small depositors in cooperatives in its 100-point agenda, and officials say necessary steps have now begun.
An official from the troubled cooperative management committee told BBC that priority will be given to returning funds to depositors who have saved up to one hundred thousand rupees.
However, the president of the Cooperative Victims’ Organization has warned that it is unacceptable for the government to try to return funds only to small depositors.
Existing law defines depositors with savings up to five hundred thousand rupees as small depositors.
The government led by Prime Minister Walendra Shah, in its 100-point agenda published on Chaitra 13, states under point number 99 that the repayment process for small depositors’ savings will start within 100 days.
Priority for Small Depositors
Officials say that following the government announcement, necessary coordination is underway between the committee and the Ministry of Land Management, Cooperatives, and Poverty Alleviation.
The ministry has also prepared a ten-point action plan and is progressing with prioritized efforts, officials said.
“We are currently discussing and preparing groundwork on whether to proceed to the next phase only after completing the first phase focused on depositors with savings up to one hundred thousand rupees,” said Bimala Roka Shrestha, secretary of the committee.
According to the committee, among the total 80,000 depositors of troubled cooperatives, 36,754 are classified as small depositors. They have claims amounting to a total of 1.36 billion rupees.
“Since it is not possible to repay everyone at once, discussions are ongoing about starting with a specific criterion or clearing deposits for individuals who have saved less than one hundred thousand rupees,” she added.
Officials are working on returning the funds for now through a revolving fund.
“The government is planning to place some money in a rescue fund and use that to repay small depositors’ funds. The repaid money will then be reimbursed through cooperative asset management and loan recovery, creating a revolving fund,” Secretary Shrestha explained.
“The government plans to facilitate the process instead of directly repaying depositors. That is the ongoing discussion.”
Extensions Granted to Three Cooperatives
The committee reports that, among 23 cooperatives declared troubled, only three have been granted extensions so far.
The cooperatives granted extensions are Kubera Savings and Credit Cooperative Limited, Standard Multipurpose Cooperative Limited, and Chartered Saving and Credit Cooperative Limited.
Together, these three institutions have 51 depositors whose claims total 22.866 million rupees.
Although there are many depositors in troubled cooperatives, there are only 80,087 registered claims.
The total claimed amount by those depositors exceeds 4.76 billion rupees.
The committee’s main responsibility is to manage and recover funds from loans and assets of the troubled institutions.
Technical and Practical Challenges
However, officials admit that the committee has not yet been able to manage assets effectively due to technical and practical difficulties.
“We found that the cooperatives re-mortgaged assets already seized by banks, and properties bought with cooperative funds are registered under individuals’ names rather than the cooperatives,’ said Secretary Shrestha.
“Due to the complexity of these issues, we have not been able to work effectively on asset management for troubled cooperatives,” she added.
The committee has so far recovered over 376.8 million rupees in loans.
“Including proceeds from real estate sales, a total of 436.51 million rupees have been repaid to depositors,” Shrestha said.
She explained that despite various challenges, the committee continues its efforts.
Initially, proper transaction details were unavailable, and many loans were provided without adequate collateral.
“Lands pledged as collateral were often overvalued, resulting in auctions that failed or sold for very low prices,” she noted.
“In many cases, banks and financial institutions had already seized assets before cooperatives re-mortgaged them. We are currently unable to confiscate such collateral,” she explained.
Photo credit, Kushalav KC
She emphasized that without action from other state agencies to hold those involved in fund misuse accountable, the problem will not be resolved swiftly. “It is not possible to repay all the money solely through loan and asset management.”
‘This Is Unacceptable to Us’
Kushalav KC, president of the National Campaign to Protect Cooperative Depositors (Federation), demanded that not only small but large depositors should also receive some repayment.
“We have clearly discussed this with the minister. Our demand is that funds should not be given only to small depositors but also to large depositors,” he said.
Kushalav KC stressed that all citizens should be treated equally from both state and legal perspectives, arguing that unequal treatment is unacceptable.
“That wouldn’t be just. Therefore, the process should be fair. If only small depositors are compensated, we will be compelled to approach the Supreme Court,” he added.
Minister Pratibha Rawal of Land Management, Cooperatives, and Poverty Alleviation also assured that the process will not move forward unreasonably, the president said.
Kushalav KC appealed that the current government should not weaken those who have been struggling to resolve this issue for the past 46 months.
